The Final Version of the G.O.P. Tax Bill Is a Corrupt, Cruel, Budget-Busting Hairball

Absent from the bill are revenue neutrality, simplicity, and fairness—three elements that congressional leaders promised to deliver when they urged Americans to embrace tax reform.

Photograph by Aaron P. Bernstein / Bloomberg via Getty

Grant the Republican Party leaders one thing: their tactics in passing
their hugely unpopular tax bill have been consistent—consistently
evasive. A few weeks ago, the Senate version of the bill was passed in
the middle of the night. This weekend, the final iteration of the
legislation was made public on Friday evening—a traditional dumping
ground for bad news. The Republicans intend to hold votes on the bill
early next week in both houses of Congress, and it seems certain to
pass.

It is hardly surprising that Republicans don’t want to give anyone too
much time to look closely at their latest handiwork. The final tax bill
is the product of a conference committee that was tasked with
reconciling the different bills passed in the House and the Senate.
Almost eleven hundred pages long, the final
bill is just as regressive and fiscally irresponsible as either of the
two earlier bills, and it is arguably more so. At its center is a huge
tax cut for corporations and unincorporated business partnerships—such
as the ones that Donald Trump owns—while arrayed around the edges are
all sorts of carve-outs and giveaways to favored industries and interest
groups.

For individual households, the bill contains some tax cuts and expanded
family credits. But these provisions are temporary, and they are also
partially offset by changes to the rules about deductions. Because the
deduction for state and local taxes will be limited to ten thousand
dollars a year, for instance, some upper-middle-class households in
states like California and New York could end up paying more to the
federal government.

Nowhere to be found in the bill are three elements that House Speaker
Paul Ryan, Senate Majority Leader Mitch McConnell, and their colleagues
originally promised to deliver when they urged the American public to
embrace tax reform: revenue neutrality, simplicity, and fairness. The
final bill is a corrupt, budget-busting hairball.

According to its authors, the bill will increase the budget deficit by
about $1.5 trillion over ten years. That’s a lot of money, obviously,
but it’s an underestimate. If you adjust the numbers for a series of
accounting gimmicks, such as expiration provisions that are unlikely to
go into effect, the real cost seems likely to come out at more than two trillion dollars.

To insure that the final bill would have enough votes in both chambers,
the conference committee larded the bill with various additional
handouts. They reduced the top rate of income tax to thirty-seven per
cent, compared to 38.5 per cent in the Senate bill. (Currently, the
effective top rate is close to forty-one per cent.) And they did a big
favor to large businesses by getting rid of the corporate Alternative
Minimum Tax, which many of them could have ended up paying because their
tax rates under the new system will be so low.

The principle of simplifying the tax code met the same fate as the
principle of fiscal responsibility: it was jettisoned. Originally, the
White House proposed reducing the number of tax brackets from seven to
three. The final bill contains seven brackets: ten per cent, twelve per
cent, twenty-two per cent, twenty-four per cent, thirty-two per cent,
thirty-five per cent, and thirty-seven per cent. On the business side,
the revised treatment of pass-through income is so complicated that most
tax experts don’t yet fully understand it. One thing we do know is
that it will create big incentives for highly paid employees to turn
themselves into independent contractors or L.L.C.s, which qualify for
the new low business tax rates.

As for fairness, that principle was junked a long time ago. The final
bill reflects the same principle as the previous two G.O.P. bills: Dom
Perignon for the plutocrats, cheap swill for the masses. The bill is
also cruel. In abolishing the Affordable Care Act’s mandate to purchase
health insurance, it will make individual plans even more costly and
more difficult to obtain, especially for sick people. This isn’t just a
tax bill. It is a backdoor effort to overturn the principle of universal
access to health care.

As reporters went through the bill on Friday evening, they discovered
various quirks, giveaways, and clawbacks, which appeared to reflect
last-minute lobbying and rushed rewriting. Businesses owned by trusts
were given a break, and so were architectural and engineering firms. On
the personal side, the bill was found to contain a substantial marriage
penalty: the maximum deduction of ten thousand dollars for state and
local taxes is the same for individual filers and couples. That’s bad
news for people who are wed—though the blow will be cushioned for those
married couples who own sports franchises. The Wall Street Journalreported on Friday night that the bill “preserves the ability to use tax-exempt
bonds for professional sports stadium bonds—a priority for Mr. Trump, a
GOP aide said.”

Another provision, which wasn’t in the House or Senate bills, allows
real-estate developers who own buildings through L.L.C.s, as Trump does,
to deduct twenty per cent of the income that these properties generate.
To qualify for the break, the properties have to be newish ones that
haven’t been fully depreciated. “This helps people who have held
property for a while, like Donald Trump,” David Kamin, a law professor
at New York University, told David Sirota and Josh
Keefe,
of the International Business Times.

Another beneficiary of this provision may well be Senator Bob Corker, of
Tennessee, who is also a real-estate investor. Corker had been the only
Republican to vote against the Senate version of the tax bill, but on
Friday he announced that he’d changed his mind, and that “after great thought and
consideration, I believe this once-in-a-generation opportunity to make
U.S. businesses domestically more productive and internationally more
competitive is one we should not miss.” Corker didn’t mention his
personal interests, but Sirota and Keefe did. “Federal records reviewed
by IBT show that Corker has millions of dollars of ownership stakes in
real-estate-related LLCs that could also benefit” from the final bill,
they reported.